Gadfly makes calls for NZ's telco future

Despite downturn, growth predicted for Kiwi telecomms

Controversial analyst Paul Budde is making his predictions for New Zealand's telecommunications year 2009, ahead of his customary industry roundtable sessions in December.

Budde says as in Australia and other markets, the financial crisis will most likely lead to a drop in consumer demand and this will put pressure on telco service prices next year.

"New Zealand’s telco sector will actually be better placed than that of Australia. Despite a potentially weaker economy as a result of the financial crisis, it has already put in place the framework for the rollout of its national telco infrastructure, which will hopefully begin to give second tier telcos a more level playing field," Budde says.

Budde predicts a growth rate of between to 2% to 3% for the telco services market in 2009, depending on the severity of the local economic downturn.

Budde says Vodafone seems to be gaining traction in the fixed line market with DSLAM wholesale agreements in place by late 2008. He predicts it will pick up significant market share from Telecom in both fixed line calling and broadband.

"It will rapidly become the main competitor of Telecom and will overtake TelstraClear. Other players like Orcon will also continue with the DSLAM rollouts and make good progress, and this will stimulate healthy ADSL2+ competition," Budde says.

"Vodafone's edge is also apparent in mobile services. The company won a competitive advantage over Telecom in mobile and Budde predicts the gap between it and Telecom will continue to widen.

"It will now be a long and difficult road for Telecom over the next few years if it is to now claw back market share from Vodafone, although its decision to go ahead with a more competitive 850MHz 3G HSPA network rollout to be launched by mid 2009, will point it in the right direction."

Budde says smaller competitors now have more attractive wholesale arrangements and this will put further pressure on prices, which have historically been too high due to Telecom’s market dominance.

Despite that, he is predicting further market consolidation, especially among smaller fixed-line telcos and ISPs.

He says given TelstraClear's inability to gain traction, it is likely that Telstra will show increasingly less interest in the telco in a worsening financial crisis, with investment funds earmarked for New Zealand diverted back to Australia.

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Tags paul buddeNetworking & Telecomms IDVodafonetelecom

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